ESD.10 Introduction to Technology and Policy
Assignment #1: Equity and Efficiency Issues
Due: Monday, Sep 11th, at the start of class
Problem:
In this assignment you will apply the concepts of equity and efficiency (as discussed in the Stone
reading). The September 11th Victim’s Compensation Fund will serve as the case study to
explore Stone’s different concepts of membership, which is necessary before making decisions
on the distribution of resources.
1. Create 8 different potential policy options for how to distribute the compensation for
victims of the September 11th attacks. These 8 options should be based on Stone’s 8
different concepts of equality as laid out in the table on page 44 of her book. Fill in the
attached matrix with a summary of your 8 policy options.
2. Is there an equity-efficiency trade-off in this policy area? Make the case that there is a
trade-off, and then make the case that there is not a trade-off. Summarize both the “Yes”
and “No” cases in a table on a single page.
Assignment deliverables:
Question 1: 1 page with a completed equity matrix (see next page)
Question 2: 1 page laying out the opposing cases for the equity-efficiency trade-off
Equity Matrix for Question #1 – September 11th Victim’s Compensation Fund
Your name: _______________________________________________
Dimension Issue
Your Policy Option
Recipients Membership
Any victim of the Sept. 11 attacks (or their
surviving spouse) is given an equal share of
the VCF.
Rank-based distribution
Distribute the VCF in amounts proportional to
the type of injury suffered from the attacks.
Surviving spouses are given the highest
amount, followed by quadriplegics, then
paraplegics, then amputees, and so on.
Group-based distribution
Divide the VCF into two equal amounts, one
for surviving female victims and one for
surviving male victims. Because men are more
likely to be breadwinners and thus to have
been injured in the workplace attacks, there are
fewer members of the female group and they
are thus given larger individual amounts of the
VCF--compensating for their historical
earnings disadvantage.
Items
Boundaries of the item
Distribute the VCF so as to ensure that every
victim receives an equal total compensation
from all sources including insurance, charities,
gifts, etc.
Value of the item
Use a sliding scale to distribute larger amounts
of compensation to poorer victims, who will
value the benefits much more than the affluent.
Process
Competition
Invite all victims and surviving spouses to the
field at Yankee Stadium. Drop the total
amount of the VCF in $100 bills from a
helicopter and allow everyone the chance to
collect as much as possible.
Lottery
Give every victim and surviving spouse one
ticket for a random lottery that determines who
receives the entire amount of the VCF.
Voting
Treat every victim and surviving spouse as a
candidate for compensation. Allow the
candidates to campaign in the public arena and
state their case for compensation. Hold a
nation-wide vote and then award the VCF in
amounts proportional to each candidate’s
(victim) share of the vote.
Question #2: Is there an Equity-Efficiency Tradeoff with respect to the Sept. 11 Victim’s
Compensation Fund (VCF)?
Yes
No
By limiting the liability of air carriers for
injuries to third parties caused during the
Sept. 11 terrorist attacks, the VCF reduces
incentives for air carriers and other
companies to innovate and adopt counterterrorism technologies and protocols.
If lawsuits were allowed to proceed
unfettered against air carriers for injuries
caused on Sept. 11, the resulting awards
might be so large as to cripple the air
transport sector. Liability limits actually
provide the necessary financial security for
air carriers to maintain operations and
improve counter-terrorism efforts.
The VCF transfers payments from taxpayers
to terrorism victims, not from the parties that
caused injuries (terrorists, negligent security
screeners, defective radio manufacturers, etc.)
to the victims. This exchange is more
efficient than determining fault through
lawsuits but is not as fair.
The taxpaying public has never questioned
the fairness of the VCF on these grounds.
Society accepts the premise that a publiclyfunded VCF demonstrates an “unprecedented
expression of compassion,” a worthwhile and
desirable characteristic.
The bureaucracy required to administrate the
VCF cost the government $87 million,
including a $77 million payment to
PriceWaterhouseCoopers. It is wasteful to
divert funds to a third party administrator that
could be used for victims’ payments.
Administration is a productive activity in
itself. The $87 million fee represents valuable
input for accounting firms and creates jobs,
pays salaries, etc.
The terms of the VCF stipulates that victims
cannot work if they file claims, reducing
productivity. Claims filing is also prohibited
for undocumented aliens, unmarried life
partners, and victims who did not seek
medical help before Sept. 12, reducing equity.
The VCF increases productivity and equity by
providing a streamlined process for Sept. 11
victims to quickly receive much needed
financial assistance and put their lives back
together in the wake of tragedy.
The VCF sidesteps the civil justice system in
the name of efficiency but thus denies
citizens their rights to a major pillar of
American democracy.
The means of the VCF might vary from civil
litigation but the ends are the same: financial
benefits are awarded in just amounts to
victims. The VCF only speeds up the process.
Distributing money discourages survivors to
work, lowering economic efficiency.
Distributing money helps survivors gain
financial security, necessary for them to be
productive members of an efficient economy.